WASHINGTON, Feb 8 - U.S. Treasury Secretary Scott Bessent said on Sunday he would not expect the Federal Reserve to move quickly to shrink its balance sheet, even if Kevin Warsh, a critic of the Fed's bond purchases, is nominated as Fed chief.
On Fox News Channel's "Sunday Morning Futures," Bessent said the central bank may deliberate for up to a year before making determinations about the size of its balance sheet. He added that Warsh would be a "very independent" Fed chief.
Bessent emphasized that decisions on the balance sheet would be in the Fed's hands. "That will be up to the Fed in terms of what they want to do with the balance sheet," he said. He went on to explain that if the Fed opts for an ample reserves regime, that would necessitate maintaining a larger balance sheet.
He cautioned against expecting immediate action. "I wouldnt expect them to do anything quickly if they move to an ample (reserves) regime policy, and that does require a larger balance sheet. So, I would think that theyll probably sit back, take at least a year to decide what they want to do," Bessent said.
The remarks highlight a view from the Treasury that any shift in the Fed's balance sheet policy is likely to be gradual and subject to extended internal discussion at the central bank. Bessent pointed to institutional independence for the Fed and signaled patience regarding potential policy changes tied to reserve frameworks and balance sheet sizing.
Context and implications
While Bessent referenced the potential nomination of Kevin Warsh and Warsh's criticisms of bond purchases, his comments focused on the timing and process the Fed is likely to follow. He underscored that the Fed itself would determine the path forward and that adopting an ample reserves approach would imply a need for a larger balance sheet, which would argue against swift reductions.
Beyond the direct quote, Bessents observations frame an expectation of deliberation and institutional decision-making at the central bank rather than rapid action.